Prudential Corporation Asia

Transcription

1 Prudential Corporation Asia 1

2 Prudential Corporation Asia Welcome Jonathan Bloomer Prudential plc November

3 GROUP STRUCTURE UK & Europe USA Asia

4 NEW BUSINESS SALES STRONG SALES PERFORMANCE 1 m APE US UK & EUROPE ASIA 2 +18% m APE % m APE % Q Q Q Q Q Q Note: 1 9 months to 30 September 2004 (at constant exchange rates) 2 Increase of 21% if discontinued sales channels in Japan are excluded (at constant exchange rates) 4

5 Prudential Corporation Asia Introduction Mark Norbom Prudential Corporation Asia November

6 Prudential Corporation Asia Portfolio in

7 Prudential Corporation Asia A great portfolio in

8 Prudential Corporation Asia Rapid growth in customers ,500, , ,500, X 3.7 X 8

9 Prudential Corporation Asia Growth in staff and agents 000 people Staff Agents 136, X , /04 9

10 Prudential Corporation Asia Forged invaluable partnerships 10

11 Prudential Corporation Asia Forged invaluable partnerships 11

12 Prudential Corporation Asia APE has grown significantly million APE % CAGR Q3/04 Constant exchange rates 12

13 Prudential Corporation Asia Asset growth even stronger billion Funds Under Management % CAGR Q3/04 Constant exchange rates 13

14 Prudential Corporation Asia Key contributor to Group s new business % of Total Prudential plc NBAP % 44% % Asia United Kingdom and United States 56% st Half 2004 Actual exchange rates 14

15 Prudential Corporation Asia Establishment of a strong platform : Geographic expansion Critical mass Emergence of competitive edge Leadership in a number of markets 15

16 Prudential Corporation Asia Current leadership positions Top 5 market ranking Insurance * Funds ** China (Guangzhou) Hong Kong India Indonesia Malaysia Philippines Singapore Vietnam India Hong Kong MPF Taiwan Malaysia * New Business Annual Premium Equivalent for Insurance ** Funds Under Management As of June

17 Prudential Corporation Asia Today Scale, pan-regional player Proven track record Market leading positions Significant competitive advantages 17

18 Prudential Corporation Asia Delivering profitable and sustainable growth Accelerating profitability Leveraging regional scale, expertise and innovation Building sustainability Creating a lasting foundation Continued strong growth Driving proven success models to all markets Strong top-line growth - even faster bottom-line growth 18

19 Prudential Corporation Asia Executive Committee Mark Norbom Chief Executive Garth Jones Finance and Actuarial Dan Bardin Insurance Ajay Srinivasan Funds Pierre Fenech Corporate Marketing Emmanuel Rodriguez IT Shulamite Khoo Human Resources Mina Hsu Brand and Communications Years with Prudential in Asia (average) : 8 years Financial services experience (average) : 20 years 19

20 Prudential Corporation Asia Our 29 speakers Years with Prudential in Asia (average) : 6 years Financial services experience (average) : 20 years 20

21 Prudential Corporation Asia Senior management teams across Asia 21

22 Prudential Corporation Asia Key points : Seizing the opportunity Growth opportunity in Asia remains significant for insurance and funds management We are uniquely positioned to seize this opportunity We are strengthening our foundation to ensure sustainability of above-market performance Our scale and our focus will yield accelerated profitability : Strong top-line growth, even faster bottom-line growth Delivering profitable and sustainable growth 22

23 Prudential Corporation Asia 23

24 Economic and Investment Review Kelvin Blacklock and Nick Scott Prudential Corporation Asia November

25 Key messages Asia saves enormous amounts of capital and is fast becoming the world s provider of credit This has huge implications and opportunities for financial markets and Prudential These themes are playing out in Asia s new powerhouses, China and India 25

26 Asia s Massive Savings piggy bank economics 26

27 Asia enjoys sustainable high levels of growth Asia has weathered many crises in past 30 years and has still seen average GDP growth rates twice as high as the US or Europe % 10 Average annual GDP growth ( 74 03) Asia x Japan Average = 6.8% Japan India Hong Kong Malaysia Taiwan China UK Philippines Indonesia Thailand Singapore Korea US Europe Source : UBS, CEIC and Datastream 27

28 Asia now generates significant income annually The rapid growth means that together Japan and Asia now generate 2/3 of the amount of annual wealth of the US billion 8000 Nominal GDP (2003) , billion ,621 2,241 Source : UBS, CEIC and Datastream 0 US Japan Asia (excluding Japan and Australia) 28

29 Asians save nearly a third of this income every year Asian saves on average 31% of its annual income, more that twice as much as in the US where the savings rate is 14% % Gross domestic savings as a % of GDP (Average from 88 to 03) US Source : Datastream, CEIC and UBS Philippines Australia UK New Zealand India Taiwan Japan Thailand Indonesia Hong Kong Korea China Singapore Malaysia 29

30 This propensity to save seems to be structural The following potential drivers behind this trend suggest high savings will continue to be a feature in Asia Cultural inclination to save reinforced by Limited social security Scare of the Asian Crisis Young populations Large diversity in wealth with lots of people aspiring to be rich Rapid urbanisation Shift away from poor rural farming economy Breakdown of traditional, local family support groups Increasingly educated population Higher numbers skilled workers Growing middle class 30

31 Asia s annual savings now exceed the US At 800 billion, Asia (ex-japan) annual savings have risen nearly fourfold since 1988 and are now larger than the US or Japan, where the trend is declining billion Gross domestic savings USA Japan Asia (Excluding Japan and Australia) Source : Datastream, CEIC and UBS 31

32 Asia also has a huge investment demand for capital With 700 billion of annual investments, Asia will soon surpass the US as the worlds largest user of capital billion 1000 Gross fixed capital formation USA Japan Asia (Excluding Japan and Australia) Source : Datastream, CEIC and UBS 32

33 Unlike the US, Asia is able to fund its own investment Asia saves 100 billion annually more than it needs for investment resulting in excess savings, in sharp contrast to the picture in the US billion Net savings = savings investment Asia USA Saving 31% 14% Illustration : % of GDP Investment 25% 17% = Excess Savings = +6% = -3% USA Japan Asia (Excluding Japan and Australia) Source : Datastream, CEIC and UBS 33

34 In fact, Asia is becoming the worlds largest creditor Asia s current account (CA) surplus is clear evidence of the excess savings which at 200 billion p.a. means Asia is now the largest creditor to the world billion 250 Asia's current account balance Source : UBS 34

35 Excess savings searching for a home 35

36 Asia s savings have not been invested efficiently Most personal savings in Asia remain in low returning bank deposits % Distribution of personal financial holdings by asset class Asian average UK US Other / Miscellaneous Mutual funds Equities Fixed income securities Life insurance and pensions Cash and deposits Source : Marakon in 02 Note : Asian average = simple average, not GDP weighted 36

37 Government policies may have distorted savings Historically, several factors may have be preventing Asia s savings from being allocated efficiently to the highest returning investments Savings distortions may result from two main factors Government guarantees eg : Post Office savings Japan CPF in Singapore Monies trapped onshore due to capital controls eg : Malaysia, Taiwan and China 37

38 Deregulations and liberalization are improving capital efficiency Recent moves to liberalise savings and investment restrictions in Asia will lead to more efficient capital allocation, creating opportunities Privatisation of post offices Japan (eventually?) Privatisation of banks in Korea and Singapore Lifting of capital controls in Taiwan and Singapore Creation of MPF in Hong Kong Privatisations in India Foreign licenses for financial institutions in China Securitisation laws in several countries 38

39 Higher returns on equity are a tangible sign of this Asian companies are now generating similar returns on equity as in the US Return on equity by geographical region (2005 estimate) % US Europe Japan Asia excluding Japan 12.9 Canada 17.0 Latin America 14.7 World Source UBS 39

40 This creates opportunities for Asian equity investors Despite the improved ROE, earnings multiples for Asian equities are amongst the lowest in the world as investors remain reluctant to fully price in this improvement Equity market PE multiple (2005 estimate) % US Europe Japan Asia Canada Latin World excluding America Japan Source : UBS 40

41 Excess savings stuck in banks also creates opportunities Even where loan growth accelerates, banks are unable to on lend all of these excess savings and must park the cash in the bond market US $ billion Taiwan excess deposits in the banks = deposits - loans /61 7/65 7/69 7/73 7/77 7/81 7/85 7/89 7/63 7/67 7/71 7/75 7/79 7/83 7/87 7/97 7/93 7/97 7/01 7/95 7/99 7/03 Source : Datastream, CEIC and UBS 41

42 This excess bank liquidity may be depressing bond yields Global bond yields are significantly below recent averages, creating opportunities to benefit from rising bond yields as this excess liquidity gets withdrawn from the banks and more efficiently invested (into equities) or spent % 1.5 Current 10 year bond yields : Difference from average (January 00 - October 04) Korea Hong Kong Taiwan Indonesia Australia Thailand Japan Vietnam India Philippines US Europe Singapore UK Malaysia China Source : Prudential, Bloomberg 42

43 China and India : Emerging giants Why are China and India so important to Prudential? The potential for growth in financial services is enormous Sustainable growth leads to higher incomes and purchase of financial products Strong growth in China and India spurs growth in the rest of Asia We are very well placed with successful operations in both markets China Will the move towards a market economy improve the quality of growth? India Will India grow above historic trends are reach full potential? 43

44 S-curve for income growth in Asia China and India have huge potential for income growth as they move from primary production to service based industries PPP-adjusted per capita GDP, US$ Primary production Labour intensive Mfg Capital intensive Mfg Services Korea Singapore Taiwan Hong Kong Japan Source: IMF, Morgan Stanley Research 0 Philippines India Malaysia Thailand China Years from beginning of economic progress 44

45 China and India : Share of world exports of goods and services % 6 5 China initiated economic deregulation in 1978 and its economic growth rates increased dramatically. China s share of global exports has doubled since 1998 and is six times India s. India began economic reforms in 1991 and has yet to reach full potential China India Source : WTO, Morgan Stanley Research 45

46 China and India : Labour advantage A large, educated labour force provides manufacturers and exporters with an abundant supply of low-cost high-skilled workers. Largely agrarian economies with surplus labour in countryside Figures in millions 800 Labour cost competitiveness in ITES 12 Average wages (US$/hr) India China Canada Germany France Japan UK US 0 India Ireland Philippines China Source : IMD World Competitiveness Yearbook, 2001 Source : IDA, World Bank, Tata Statistical handbook, Edelweiss, Frost and Sullivan 46

47 China and India : Positive demographics China and India account for 40% of world s working-age population and will add 139 million workers in next 6 years Global Growth in working-age population (15-64) over the next 6 years (million) World India Africa* China South East Asia Latin America Western Asia USA Western Europe Japan Stock Position Additional working age population by China and India : Working population age 15-65* (million) India takes over China India China * Note : Africa includes a group of 56 countries Source : UN, Morgan Stanley research * People who could potentially be economically active Source : UN 47

48 China and India : Positive demographics China has created a virtuous cycle : Increasing productive workforce higher savings greater investment. India s age dependency ratio will fall over the next 20 years China and India : Age-dependency ratio (%) China and India : Savings and age dependency trend Source : UN, CIEC, CSO, Morgan Stanley Research 48

49 China and India : Different growth models Historic growth has been accomplished with different economic models. New industries are rapidly emerging in China and India. The two development models are converging China s growth relies on foreign direct investment, whilst India s growth relies more on domestic private sector China is rapidly becoming a global manufacturing stronghold, and India is establishing itself as an important centre for outsourcing services China India Existing core industries Electronics and machinery, toys, textile and clothing, lower-end IT equipment. Software and IT services, resources industry, pharmaceuticals and leather. Emerging growth industries Petrochemicals, IT equipment, automobiles, services, machinery and equipment. Toys, auto and auto components, textile and clothing, engineering and capital goods. Source : Prudential Asset Management Hong Kong (PAMHK) 49

50 Textiles : A new source of growth China and India should take larger share of global trade after textile quota removal in 1Q 2005 World trade in textile to reach US$650 billion by US$ billion Source : KSA Technopak 50

51 China : Credit and investment risk China s growth has been fueled by rapid investment and credit growth, with inefficient investment a key risk. Looking ahead, as elsewhere in Asia, we expect more efficient capital use and consumption to emerge as drivers of growth % China - fixed investment and credit as % GDP % Source : CEIC Credit, RHS Fixed investment, LHS 51

52 China : The rise of the private sector The quality of Chinese companies is improving along with more return based investment decisions. The private sector is increasing its share of the industrial pie Private companies generally possess better management than state-owned enterprises account for an increasing share of industry Private sector growth is a result of rise in entrepreneurial class and university funded research and development State owned enterprises are listing their prize assets. These companies are a models in restructuring for inefficient state sector RMB billion Collective-owned State-owned 1000 Private 500 Source : CEIC, January

53 China : Growth despite its banking system Banking reforms are now top priority. The big four state banks to be listed by An efficient and stable banking system can increase savings into productive investments % Average non-performing loans of the big 4 state banks 32.9 Source : China Banking Regulatory Commission /2003 %

54 India : Services has been the growth driver India continues to move up the value chain in tradeable services such as software and pharmaceutical 230 companies out of the Fortune 500 already outsource software-related services to India India produces a vast supply of English speaking IT engineering graduates IT and IT-enabled services exports (US$ million) 32,500 IT services ITES CAGR = 53% 17,500 5,312 6,147 7,200 8,400 1,100 1,759 2,600 3,362 3, ,500 2,300 Source : Nasscom, 2003 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04E FY08E 54

55 India s cost of borrowing has fallen dramatically India s government bond yields have halved in the last 6 years which will boost gross fixed capital formation % INR historical 10Y 3mth MIBOR spread /23/99 8/21/99 3/18/00 10/14/00 5/12/01 12/8/01 7/6/2002 2/1/03 8/30/03 3/27/04 10/23/04 INR 10Y govt INR 3mth interbank INR 10yr govt yield 3mth interbank 55

56 India : Structural impediments to growth The issues which have held back growth are well known. There are some positive trends although reform implementation is slow Unfavourable tax structure Low savings rate Low FDI Large fiscal deficits Inadequate infrastructure Bureaucratic government Inflexible labour laws India s demographic profile is positive for savings and investment The Government is planning to reform and simplify the tax structure India has made significant improvements in telecom, highway and port infrastructure Many sectors have been opened up to FDI such as telecom and aviation 56

57 Summary High savings have turned Asia into the world s largest creditor Deregulation will allow Asia s excess savings to be invested more efficiently. Great opportunities exist for experienced financial product providers Personal savings in Asia should shift from low returning bank deposits to other asset classes such as life insurance, pensions and mutual funds China and India are set to become the new economic powerhouses of Asia. The penetration of savings and protection products is low China and India s income growth should be rapidly boosted by favourable demographics 57

58 Opportunities for Prudential 58

59 The Opportunity Mark Norbom Prudential Corporation Asia November

60 Asia : Drivers of growth Size and growth of market Market liberalization Low penetration of medium and long-term savings products Drivers of growth strong as ever 60

61 Asia : Size of market 58% of the world s population Population (m) China 1,292 India 1,055 Indonesia 219 Japan 128 Vietnam 81 Philippines 80 Thailand 64 South Korea 48 Malaysia 25 Taiwan 23 Hong Kong 7 Singapore 4 Source : CEIC and Datastream 61

62 Asia : Potential for sustained growth 10% 9% Averaged Annual GDP Growth : % 9% Forecast 8% 8% 7% 6% 5% 4% 3% 2% 1% 4.7% Average % 6% 5% 4% 3% 2% 1% % 0% Japan Indonesia Hong Kong Thailand Philippines Taiwan Singapore Korea Malaysia India China US UK Europe Japan Asia ex-japan Source: UBS Source: IMA Asia (September, 2004) Continuing to outpace Europe and the US 62

63 Asia : Market liberalization Diversity is now one of the key benefits as Prudential has operations in no fewer than 12 different countries within the region Merrill Lynch (6 October, 2004) An enviable set of licenses 63

64 Asia : Demand for products Percentage of holdings by asset class % Hong Kong Singapore Japan Korea China Indonesia Malaysia India Taiwan Thailand Philippines UK US Other / Miscellaneous Mutual funds Equities Fixed income Securities Pensions Life insurance Cash / Deposits Increasingly seeking alternatives to cash Source : Marakon 2002 Note : UK Life and Pensions sectors are combined 64

65 Prudential Corporation Asia Key points : Seizing the opportunity Growth opportunity in Asia remains significant for insurance and funds management We are uniquely positioned to seize this opportunity We are strengthening our foundation to ensure sustainability of above-market performance Our scale and our focus will yield accelerated profitability : Strong top-line growth, even faster bottom-line growth Delivering profitable and sustainable growth 65

66 Turning challenges to opportunity Challenges Local incumbents Economic volatility Developing legal and regulatory frameworks Our strengths Partnering with locals Pioneering market development Diversity of markets, products and distribution Extensive local experience Increasing competition Market leading innovation, distribution and brand Local experience. Diversity. Market leadership 66

67 Prudential Corporation Asia Experience in all market types Nascent markets Success factors : First mover advantage Build distribution quickly to access customers : Agency model Core product focus Build brand awareness Sound operation Developed markets Success factors : Differentiation from competitors Multi-channel distribution Innovative product mix Customer life cycle management Scale efficiencies Superior service 14 Premium income as % of GDP Source : Swiss Re Vietnam Philippines Indonesia India PR China Thailand Malaysia Singapore Hong Kong South Korea Japan Taiwan 67

68 Prudential Corporation Asia The advantage of experience South Asia Greater China North Asia Country Products Life : Traditional Unit-linked Mutual funds General Distribution Agency Bank Broker Direct SG MY Tha i Indo Phil VN India HK TW China* JN KA as of October 2004 * Guangzhou 68

69 Prudential Corporation Asia Building market leadership Number of markets in top 5 share * In Manulife AIG 2-3 Great Eastern Sun Life CMG 0-1 Cathay Life RSA CGNU Zurich US Prudential New York Life Aegon Allianz AXA ING Market presence * NBAPE or total premium revenue dependent local insurance industry reporting Source : Prudential Internal Analysis 69

70 Prudential Corporation Asia Strengthening market leadership Number of markets in top 5 share * 6-10 Year end 2003 AIG 4-5 ING Manulife 2-3 Great Eastern Sun Life Allianz 0-1 Nippon Life Cathay Life Samsung Life Aegon Zurich Aviva Mass Mutual US Prudential NY Life AXA Market presence * NBAPE or total premium revenue dependent local insurance industry reporting Source : Prudential Internal Analysis 70

71 Prudential Corporation Asia Winners in Asia Winners are likely to be established players who know the culture and have management strength and depth in the region Source : UBS (24 Sept 2004) 71 71

72 Prudential Corporation Asia Key points : Seizing the opportunity Growth opportunity in Asia remains significant for insurance and funds management We are uniquely positioned to seize this opportunity We are strengthening our foundation to ensure sustainability of above-market performance Our scale and our focus will yield accelerated profitability : Strong top-line growth, even faster bottomline growth Delivering profitable and sustainable growth 72

73 Seizing the Opportunity Mark Norbom Prudential Corporation Asia November

74 Prudential Corporation Asia Vision : Market leadership To be the market leading savings, investment and protection company in Asia for our customers, staff, distributors, partners, and shareholders 74 Brand strength and reputation Superior service and professional advice Flexible multi-distribution Innovative products Best people and management Highest growth rate and return

75 Delivering profitable and sustainable growth Accelerating profitability Leveraging regional scale, expertise and innovation Building sustainability Creating a lasting foundation Continued strong growth Driving proven success models to all markets Strong top-line growth - even faster bottom-line growth 75

76 Increasing profitability High Singapore Increasing profitability Scale Low Hong Kong Taiwan Vietnam India Korea Indonesia Japan Thailand Philippines China Low Portfolio margin Malaysia Mutual Funds High 76

77 Leveraging scale, expertise and innovation The Integrated Operating Model Insurance Asset Management Established Expertiseoperations Market-plus growth Transfers Net cash generators Experience sharing Developing operations Strong annual growth Strong growth Increasing capital repatriation Product Lab Scale Customer Experience Programme Value creation Linked products Sharing best practices Region / Group Retail mutual fund business Life / Institutional fund value creation Develop linked products Strong growth Increasing net income Shared systems and processing Product innovation Capital for growth Partnership and M&A execution Strategy and budget oversight Partner and government relations management Brand and marketing support Centralized processing and product / systems development Governance and compliance processes Customer life-cycle focus 77

78 Accelerating profitability Expertise transfers Scale benefits Increases margin Sharing best practices Shared systems and processing Product Innovation / Lab Customer experience programme 78

79 A lasting foundation Building sustainability People Risk management Brand strength 79

80 Attracting and retaining people What employees want Scale, growth and diversity A company with outstanding career opportunities Reputation and culture A place where you are proud to work 80

81 Career development opportunities People transfers between our Asia businesses Sep 2004 Over 95% across borders 81

82 Leadership development Asia Leadership Development Programme Selection Class training Apprenticeships Exposure High potential Flexible Language skills People and functional skills Company culture On-the-job training and assessment Top management access and advice Initially focused on China 6 month programme 3 classes (28 people) to date Developing the pipeline of future leaders today 82

83 Risk management focus Strategic Business environment Risk management A framework for strengthening the business foundation Investment Operational Compliance Underwriting Partners and suppliers Improved process Greater accountability Deeper compliance culture 83

84 Compliance Three-pronged strategy Prevention Clear guidelines Management communication Case-study based training Detection Every business with a senior compliance leader Every major sales force has a compliance organization Immediate issue reporting Culture of compliance 80 compliance staff Reaction Prompt and strict discipline Full cooperation with regulators No exceptions to the rules Making our culture of compliance a competitive advantage 84

85 Brand strength 85

86 Continued strong growth Multi-channel distribution Business building expertise Driving proven success models to all markets Product innovation Customer centricity 86

87 Business building expertise Vietnam No 1 market share Over 37,800 agents 65 offices 95% brand recognition India No 1 market share Over 44,000 agents 90 offices 92% brand recognition China Over 6,900 agents 3 offices Plus Shanghai Using our growth model tested in Vietnam and India 87

88 Multi-channel distribution Tied agents Independent financial advisors Bank Target customers Direct and telemarketing 88

89 Innovative products and services 89 89

90 Customer centricity Segmentation and targeting Understanding their lifetime needs Innovative needs-based products Trusted for professional advice and superior service Market leadership Profitability 90

91 Delivering profitable and sustainable growth Accelerating profitability Building sustainability Continued strong growth Leveraging regional scale, expertise and innovation Creating a lasting foundation Driving proven success models to all markets Integrated operating model Leadership development Risk management Brand strength Business building expertise Multi-channel distribution Product innovation Customer centricity Strong top-line growth - even faster bottom-line growth 91

92 Prudential Corporation Asia Key points : Seizing the opportunity Growth opportunity in Asia remains significant for insurance and funds management We are uniquely positioned to seize this opportunity We are strengthening our foundation to ensure sustainability of above-market performance Our scale and our focus will yield accelerated profitability : Strong top-line growth, even faster bottom-line growth Delivering profitable and sustainable growth 92

93 Financial Overview Garth Jones Prudential Corporation Asia November

94 Prudential Asia financial performance Strong, diverse and sustainable Diversity of geography, product and distribution for breadth of growth opportunities and lower volatility Consistent delivery across all metrics; material shareholder value already created Rapidly growing regional scale; increasingly generating surplus capital to remit to Group Solid platform for sustained profitable growth 94

95 Consistent track record of delivery 2000 ( m) 2001 ( m) 2002 ( m) 2003 ( m) CAGR H12004 ( m) APE % 248 NBAP % 135 NBAP margin 60% 58% 59% 52% 54% Mutual Funds : AUM 1,370 2,724 4,752 6,462 55% 7,092 Operating achieved profit* (before tax and MI) Operating MSB* (before tax and MI) % % 175 Constant exchange rates * Before development expenses and RHO costs 95

96 Successful diversification : Geography APE : million APE : Q million Constant exchange rates Established 100% China 3% Vietnam 5% India (@ 26%) 6% Indonesia 6% Korea 11% Taiwan 26% Established 40% Others 3% Hong Kong 18% Malaysia 10% Singapore 12% 96

97 Successful diversification : Distribution APE : million Direct 3% Broker 5% Bank 17% APE : Q million Agency 100% Agency 75% Constant exchange rates 97

98 Maintaining a diversified product mix NBAP : million NBAP : H million Linked 40% A&H 28% A&H 30% Linked 44% Traditional 30% Constant exchange rates Traditional 28% 98

99 Managing product and geography mix NBAP by product NBAP by country High NBAP/ APE Low A&H Linked SP Linked RP Traditional RP High NBAP/ APE Low Malaysia Korea S pore Taiwan Hong Kong Traditional SP Low High Sales volume Low High Sales volume Q at constant exchange rates 99

100 Maintaining good margins NBAP margin on APE % Average margin = 55 % 10 0 H12001 FY2001 H12002 FY2002 H12003 FY2003 H

101 Driving organic growth : Life business APE million CAGR 69% CAGR 19% Post-acquisition CAGR 25% Established markets Start ups Acquisitions Constant exchange rates 101

102 Building scale : Increasing inward cash flows Revenue premiums million CAGR 30% H12004 Constant exchange rates Renewal premium Single premium 102

103 Significance of regular premium business Renewal premiums give stability to cashflows million CAGR 32% H12004 Constant exchange rates Renewal premium Single premium 103

104 Driving organic growth : Mutual funds billion 7 Funds under management Growth 36% CAGR 52% CAGR 51% Q32004 India Taiwan Others Constant exchange rates 104

105 Building scale : Material funds under management billion 15 Funds under management (sourced in Asia) 10 CAGR 46% H12004 Constant exchange rates Life funds Mutual Funds 105

106 Embedded value created : million 2, , , ,600 1,400 1,200 1, EV added = 609 million 1, Opening AP funds Net new capital Operations Long term AP funds Econ Assptns Ex Rates Closing AP funds 31 Dec Dec

107 New business is main driver of operating achieved profits million 1,400 1, (59) (377) 1, New business Unwind Assptns Reserve release Variances Devel Tax Op profit 1 Jan 2001 to 31 December

108 Small AP experience variances million AP variances as % of opening AP shareholder funds % AP variances % of AP funds 108

109 AP experience variances in detail million (1) Claims Persistency Expenses Others 109

110 Persistency variance trend Average persistency variance over the last 6 years less than 1 million million (18.5) (7.0) (13.1)

111 New business strain grows with sales Year Growing new business at 20% per annum New business strain 111

112 In the early days in-force throws off insufficient cash to fund growth; external funding required (215) Capital support (333) (344) (259) (67) Cumulative 691 cash flow 243 Cash generated by inforce Year New business strain Growing new business at 20% per annum

113 In time inforce throws off sufficient cash to fund internal growth and remit capital Surplus capital available for remittance 2,114 3,158 Cumulative cash flow (215) (333) (344) (259) (67) ,304 Cash generated by inforce New business strain -15 Year

114 Growing in-force book funds growth internally and produces accelerating cash surplus Increasing surplus cash 810 1,044 Positive cash flow Cash generated by inforce Year Growing new business at 20% per annum New business strain 114

115 Consequences of increasing scale High 2004 Capital Surplus Capital Support Singapore Hong Kong Malaysia Profitability and size of inforce book China Vietnam India Japan Taiwan Korea Thailand Indonesia Philippines Funds Low Low Ability to fund growth internally High 115

116 Net capital repatriations from 2006 million Net capital requirement F 1 (22) (7) (11) (158) (76) (144) (274) (143) (99) (95) Forecasts for 2004 and 2005 are net capital injections of 100 million Forecast 2006 small net repatriation Repatriations increase steadily thereafter Working capital Repatriations Acquisitions Actual exchange rates 116

117 Summary Strong, diverse and sustainable Diversity of geography, product and distribution for breadth of growth opportunities and lower volatility Consistent delivery across all metrics; material shareholder value already created Rapidly growing regional scale; increasingly generating surplus capital to remit to Group Solid platform for sustained profitable growth 117

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